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FHA Credit Score Guide

FHA Loan With a Low Credit

A practical guide for borrowers asking whether a lower credit score blocks FHA financing, how HUD defines the score used for eligibility, and why the score is only one part of the file.

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Credit Score Basics

FHA looks at the Minimum Decision Credit Score, not just the highest score on the report.

HUD Handbook 4000.1 defines the Minimum Decision Credit Score, or MDCS, as the score used for FHA eligibility. If three scores are reported, the median score is used. If two differing scores are reported, the lower score is used. In multi-borrower files, the lowest MDCS among borrowers is selected.

That score affects basic eligibility and maximum insured financing, but it does not approve the file by itself. FHA underwriting still reviews credit history, debts, income, assets, property, and the overall risk profile.

Bottom line: FHA can be more flexible than conventional financing, but a low score still needs a complete file review. Do not treat a credit score alone as approval.
HUD Credit Rules

The 500 and 580 credit score lines matter.

Below 500

HUD Handbook 4000.1 says a borrower is not eligible for FHA-insured financing if the Minimum Decision Credit Score is less than 500.

500 to 579

HUD guidance says borrowers with MDCS between 500 and 579 are limited to a maximum LTV of 90 percent, which usually means more equity or a larger down payment is needed.

580 and above

HUD guidance says borrowers with MDCS at or above 580 are eligible for maximum financing, subject to the rest of the FHA file qualifying.

What Underwriting Checks

What still matters beyond the score.

A credit score is a signal, not the whole decision. The underwriter still has to understand how the borrower manages obligations now and whether the new payment is reasonable.

Recent payment history

Late payments after a major credit event can be a bigger issue than old derogatory credit. Housing history, installment accounts, revolving debt, and new credit activity all need review.

Debt and income

A lower score paired with high debt ratios is a different risk picture than a lower score with stable income, low debt, and reserves. FHA still has to calculate qualifying income and monthly liabilities.

Funds and property

Down payment, closing costs, reserves where applicable, source of funds, property condition, appraisal, title, and occupancy must all fit the program.

Common Traps

Do not get tripped up by half-true FHA advice.

"FHA approves everyone over 580"

No. A 580+ MDCS may allow maximum financing, but the full borrower, credit, property, income, assets, and underwriting file still has to qualify.

"A 500 score always works"

No. HUD sets 500 as a minimum eligibility floor, but 500-579 files are more restrictive and lender overlays can apply.

"Credit repair first, mortgage later"

Sometimes. But guessing can waste months. It is better to review the file first so the borrower knows which items actually matter.

Source Notes

Where this guidance comes from.

This page is based on HUD Handbook 4000.1, Single Family Housing Policy Handbook, current HUD update listed August 12, 2026. Key sections reviewed include Borrower Minimum Decision Credit Score and LTV limitations based on borrower credit score.

The article is informational, not a loan approval, legal advice, credit counseling, APR disclosure, or commitment to lend. Final eligibility depends on the complete file and underwriting.

Source: HUD Single Family Housing Policy Handbook 4000.1

Want your FHA credit score scenario checked?

Bring the score range, recent credit history, income, debts, assets, and purchase or refinance goal. We will review the real file before you count on it.

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Reviews

What borrowers say about Texana Bank

Real reviews from real borrowers, pulled live from our Google Business Profile.

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